4.2 Cereals

Cereals account for about 13 per cent of total farm output, an
estimated £334 million in 2015 and around 43 per cent of the
output from crops in general.

Chart 4.5 shows trends in the average annual output prices for
cereals, used in the
TIFF
valuation. It is important to note that these calendar year prices
span two crop production years and represent the value of cereals
when they are used or sold off the farm. They also represent an
average across different types of cereals used for animal feed,
seed, human consumption and industrial purposes. These prices,
which are obtained from the
HGCA (Home
Grown Cereals Authority) incorporate tonnages sold on forward
contracts as well as cereals sold at spot prices.

Cereal output prices were relatively stable between 2005 and
2006, before increasing substantially in 2007 and remaining high in
2008. They then dropped quite markedly in 2009 before three years
of increases. After peaking in 2012 at £180 to £190 per
tonne, prices have fallen to about £100 (barley), £110
(oats) or £120 (wheat) per tonne, reflecting global trends in
supply and demand of cereals.

Chart 4.5: Annual average output prices for cereals 2005 to
2015

Chart 4.6 shows the utilisation of cereals for different
purposes. In 2015, the majority of barley (70 per cent) was used
for animal feed, whilst the majority of wheat (58 per cent) and
oats (82 per cent) was used for human and industrial purposes.

Chart 4.6: Cereal utilisation: 2013 to 2015

In 2015, total value of cereal output fell by 44 million (down
12 per cent), compared to 2014, following a previous decrease of
£48 million (11 per cent) between 2013 and 2014. The output
value of barley fell by £34 million (down 15 per cent), due
to a combination of £9 per tonne (eight per cent) decrease in
price and a 149,000 tonne (seven per cent) decrease in production.
The output value of wheat decreased by £10 million (eight per
cent), due to a £15 per tonne (12 per cent) decrease in
price, despite a 30,000 tonne (three per cent) increase in
production. The value of oats remained relatively unchanged due to
only very few change in both production figures and prices.

Accounting for inflation, between 2009-10 and 2014-15 the
average
FBI of cereal farms
decreased by around 43 per cent, and by 74 per cent from the peak
in income of £63,000 between 2010-11 and 2011-12. This was
due largely to the decreased value of crop revenues and subsidy
payments.

In the last year, both spending on inputs and revenue for cereal
farms have decreased. As revenue saw a larger decrease at the same
time as a fall in subsidy payments, this resulted in an overall
decrease in income for 2014-15 to leave the
FBI value of cereal
farms at £16,000.

The average
FBI/
FTE for cereal
farms of £12,000 is roughly equivalent to an hourly wage for
unpaid labour of £6.37, equivalent to 91 per cent of the
minimum agricultural wage in Scotland. Around 54 per cent of cereal
farms generated incomes equivalent to less than the minimum
agricultural wage (
MAW), whereas
11 per cent generated more than five times
MAW.

At £66,000, on average, high performing cereal farms
generated incomes roughly four times the overall average. Low
performing farm businesses made an average loss of
£32,000.

Cereals Farms

The total average revenue for cereal farms, including income
from diversification and subsidy payments, was £206,000.
Spending on inputs averaged £190,000. The largest portion of
the input costs was due to other inputs such as machinery, land and
buildings and fertilisers.

Over the last three years,
FBI without subsidy
payments has been a loss. Over the six-year series this figure
ranged from a loss of £22,000 in 2012-13 to a profit of
£16,000 in 2011-12. Over the last year,
FBI without subsidy
payments has slightly worsened to a loss of £17,000.

Over the last year, cost centres for cereal farms show a small
increase in income from diversification, but decreased income from
agricultural activities and direct payments. There has been little
change to the income from agri-environment and contracting
activities.

The average net worth (assets minus liabilities) of cereal farms
was £1.9 million in 2014-15. The average debt ratio
(liabilities:assets) remained unchanged at eight per cent for
cereals farms but ranged between eight per cent for owner-occupied
and 19 per cent for tenanted farms.